Why Boeing Stock Keeps Going Down

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What happened

Don’t look now, but aerospace giant Boeing (BA -2.68%) has been on kind of a losing streak lately — one that began with its report of a billion-dollar quarterly loss last month and is ending with Boeing wrapping up a five-day-long slide in share price today.

With less than an hour to go in the trading day, as of 3:20 p.m. ET, Wednesday, Boeing stock is down 2%.

Image source: Getty Images.

So what

That wasn’t how today was supposed to go. In fact, as recently as this morning, Boeing stock actually seemed like it was heading higher, posting 4.5% gains in early trading, after Boeing CFO Brian West visited Goldman Sachs to announce that China will soon clear the Boeing 737 MAX airliner for a return to service in that country.  

At that same Goldman Sachs conference, West also reassured investors that Boeing has sufficient cash for its needs at present and is not planning to draw upon its credit lines or issue new shares to raise funds — allaying investor fears of impending stock dilution.  

Now what

But here’s the thing: Boeing’s CFO also warned investors that shortages of parts are hindering production of the 737 MAX, such that even if China does clear the plane for service, that won’t necessarily translate into more planes being built and sold. He also noted that “all options are on the table” with regard to issuing new Boeing stock to raise funds once conditions are more favorable for doing this.  

Heard in context, West’s remarks seemed to point only to the potential need for more cash if and when production numbers pick up, which would necessarily mean that Boeing must have cash to buy more parts to build more planes and thus arguably be good news for Boeing. But heard a different way, West’s comments struck a more downbeat note.

Consider this: With Boeing stock down 40% over the past year, any new shares Boeing issued and sold today would bring in far less cash than Boeing might have gotten from selling those same shares a year ago. Thus, West’s almost offhand remark had the effect of emphasizing the troubles Boeing’s going through lately and how far its stock has fallen.

In the broader context of a falling stock market, still-high interest rates, and Boeing stock that — even down 40% — still costs nearly 40 times forward earnings, there simply isn’t a whole lot for Boeing investors to be happy about these days.